John Linton
.....than I thought affecting today's Australian communications market places.
We had expected to have signed off on our 'negotiations' for new services well before now but the revised approach we have taken to obtaining bids for our, not very large requirements in the context of the current 'buyers' in Australia, seems to be of a disproportionate interest to some of the suppliers we approached. I am, through experience, a very conservative buyer of base services as I have seldom seen 'new' base service providers deliver on new infrastructures without very significant 'negatives' that seem to last far longer than even the most pessimistic estimates. However I am having a great deal of trouble reconciling the current price disparities between the pricing offered by our 'traditional/long term' providers and the newer possible entrants to the Australian marketplaces.
Perhaps our previous approaches to 'negotiation' have been naive and, maybe, even just plain stupid and our long term suppliers have got used to treating us carelessly? Maybe I will have to accept that we have, through my personal stupidity, allowed that view to have grown over the years. I think that is probably a distinct possibility. However I can't help thinking that something else has changed this time around that is making more difference than modifying our previously naive buying processes. Possibly its the fact that the number of potential purchasers of IP services in Australia is decreasing (Westnet, Soul, People Telecom, and now NetSpace all 'exiting' the buying process over the past 18 months or so). Those companies 'exits' don't leave many buyers of any 'size' left for the newer entrants to sell reasonable amounts of IP services and inter-State transits to. I think that may have had a greater influence than I thought when we started this years 'negotiations'.
With the times being as tough as they currently are and, at least in my opinion, likely to get significantly tougher it is very difficult for us not to move away from the providers we have dealt with over the last six years and to 'try something entirely different'. My back of the envelope calculations of what the latest 'revised' offer we received last night would reduce our costs by over the offer we are (were?) about to sign a contract for shows cost reductions over that offer that are hard for us to not consider very, very carefully before making any 'final' decision. We will do the proper analysis of the new offer today and then carefully consider the various ramifications over the week end before making a final decision next Tuesday when Steve is back in Sydney.
We need to also consider the wider issues of what such offers mean to the Australian data communications 'industry' more generally. A year ago I simply couldn't conceive that IP costs (available to a company of Exetel's size) could fall by over 70% in 9 months. Although IP is no longer the largest component of providing internet services (the port and carrier connection costs are five times larger) it is still significant and the lowest costs currently offered would cut our current IP monthly bill by 66% - which would transform our profitability forecasts to numbers we never dreamed possible....not a bad 'day dream' to allow yourself to have - even if only briefly - because such things don't really happen in business. Or do they?
Perhaps Exetel, like so many residential buyers of communications services, has become used to being 'ripped off' by the prices charged by Telstra and co over the past 20 years that we actually don't believe that anything else is possible? Perhaps I should go back to the base maxim of my technology past where the expectation always was that prices fell by 50% and delivered twice as much every 18 months and use that as a base point for asking for new pricing? That level of pricing, at least at the moment, is easily achievable. I guess it puts clearly in perspective the danger of living in a country that has a monopoly infrastructure provider - gouging pricing is the inevitable result without competition.
As the ADSL market becomes even more fiercely competitive it occurs to me that it might be worth considering re-selling IP bandwidth to some smaller ISPs but mainly to larger corporate and government users. Currently, as has always been the case for Exetel, we put in a lot of effort and cost to make almost nothing out of ADSL services and that will only get worse over the coming 12 months or so. It might make much more sense to deliver IP services to the corporate market without the hassle of dealing with Telstra?
What is the only thing worse than a commercial monopoly? A government monopoly?